New forecasts show China's defence spending will outstrip Britain, Germany and
France combined by 2015

Soaring defence budgets in China and Russia mean global military spending is growing for the first time in five years, according to new forecasts.

Spending across Asia and the Middle East is surging even as the military powers of Europe and the US are forced to scale back dramatically in the face of austerity cuts - contributing to a steady change in the balance of military power.

The figures were disclosed as the secretary general of Nato issued a stark warning that the West will cede influence on the world stage because of its falling spending.

Anders Fogh Rasmussen said he was concerned about falling funding in Washington and European capitals while there was a military spending spree in Russia and China.

He told BBC Newsnight: “When governments are forced to cut deficits and make deep cuts it’s difficult to argue defence should be exempted.

“But of course it is a matter of concern taking into account that other powers invest more and more in defence and at the end of the day it means we will have less influence on the international scene, the vacuum will be filled by other powers and they do not necessarily share our interests and our values.”

The switch means the “centre of gravity of defence expenditure is expected to continue to shift south and east”, according to defence consultancy IHS Jane’s.

According to its latest annual defence budgets review, global defence spending will rise slightly to £945 billion this year, after four successive years in which the total fell from just over £1 trillion, its 2009 peak.

Within that, China’s planned spending on its armed forces will for the first time eclipse the combined budgets of Britain, France and Germany. Beijing has set aside £90 billion ($148 billion) for its military, up more than six per cent on last year, continuing its long-running trend of growing defence spending.

American spending - at £351 billion, still the highest in the world - is falling by 1.3 per cent this year, while Britain, which ranks in fourth place behind China and Russia, will spend £35 billion, 3.6 per cent less than last year.

China is speeding ahead with a wide-ranging modernisation of its forces as it upgrades and replaces a broad range of military hardware, at a time of strained relations with its neighbours as acrimonious territorial disputes in both the East and South China Seas have flared.

The Chinese and Japanese ambassadors to London then used the pages of The Daily Telegraph to accuse each other's governments of aggression and militarism.

Craig Caffrey, a senior analyst at IHS Jane’s, said China’s budget was growing in line with its “rising global economic and geopolitical power rather than as a sign of belligerence”.

But he added: “There is valid concern that the scale and pace of the increase in defence spending will create a level of instability due to mistrust among neighbouring nations and that to some extent appears to be spurring increase of spending elsewhere in the region.”

Other Asia Pacific nations boosting their defence spending include South Korea, India and Australia.

Spending increases are highest in Russia, whose military budget will rise by more than 44 per cent over the next three years as it too modernises its forces - spending £48 billion ($78 billion) on defence this year - despite a slowdown in economic growth.

Spending increases are highest in Russia, whose military budget will rise by more than 44 per cent over the next three years as it too modernises its forces - spending £48 billion ($78 billion) on defence this year - despite a slowdown in economic growth..

Mr Caffrey said: “In 2013 we saw the defence budget continue to increase while spending on health and social care was reduced.”

Four of the five fastest growing defence markets in 2013 were in the Middle East and Saudi Arabia’s budget has trebled in the past decade. The Gulf state is spending large sums on combat jets and attack helicopters.

Paul Burton, director at IHS Jane’s Aerospace, Defense and Security, said: “With military budgets among many of the major Nato nations due to continue to contract over the next 12 months, the centre of gravity of defence expenditure is expected to continue to shift south and east in 2014, following the trend of global economic expansion.”

Barry Pavel, a former senior defence official in the Obama White House, said that Russia’s increased spending was likely to be a “temporary phenomenon” based on oil prices while China’s was “a long-term, sustained increase” and was “the more important area to watch”.

Keith Urbahn, a former chief of staff to Donald Rumsfeld, the US defence secretary under George W Bush, said: “These trends are the latest sign of an America in retreat and willing to relinquish its global security responsibilities. China and Russia see the vacuum of leadership and are seeking to fill it.”